Financial markets data science firm, FairXchange has added a new pricing stack analysis feature to its Horizon platform, a move the firm claims is “game changing’ by enabling financial institutions to make more informed, data driven decisions about how they interact with existing and prospective liquidity providers.
By providing a complete view of a financial institution’s pricing stack, FairXchange’s Pricing Stack Analysis provides insight into the dynamics of their liquidity and enables banks, brokers and hedge funds to understand the financial impact of their liquidity provider selection compared to other choices they could make.
The new service uses FairXchange’s proprietary technology to start addressing what the firm says are “specific insightful yet previously unanswerable questions” such as what targeted feedback can a firm give to its liquidity providers to increase their revenues whilst simultaneously reducing the firm’s costs? The analysis tool is also able to inform decisions around how much removing or adding a liquidity provider changes its bottom line execution costs. It also looks at the best spreads and skews from LPs as well as offer analysis to back up decision making on shrinking liquidity providers within a dedicated pool.
“A fundamental issue that the market currently faces is that financial institutions find it very hard to measure the financial impact of any changes to their liquidity provision,” observes Guy Hopkins, founder and CEO, FairXchange. “Conversely, liquidity providers find it hard to demonstrate the value they can bring to a client, how much more money they can save them or how they can win more clients through data-driven discussions. We have developed our Pricing Stack Analysis to address these issues, providing concrete evidence about the impact of liquidity decisions on a financial institution’s P&L.
“With margins so tight in FX, firms will increasingly need to rely on data-driven decision making in order to make greater profits,” he continues. “FairXchange has a proven track record in applying our domain expertise to help customers craft a narrative from their data. Pricing Stack Analysis propels our offering to another level as we can now crystallise the results from our analysis in monetary terms – i.e. measuring cost savings in real dollars. This makes it far easier to justify the subsequent cost of onboarding a new liquidity provider, for example. Helping them identify tangible evidence of the potential savings they can make is a core part of our value proposition.”